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Thursday, August 23, 2012

Rewriting Its Own Bad Obamacare Law

Have we ever had a President of the United States that was so lawless? He continuously breaks the law! I can't remember this ever happening in my lifetime. The man absolutely disregards our Constitution and no one holds him accountable! Speak up, Mr. Speaker! - Reggie

Who needs Congress when the Obama administration is ready to legislate?

President Barack Obama won big when Congress passed his health care bill. But the administration made a serious mistake and now is trying to rewrite the law. Without going to Congress, as required by the Constitution.

The central feature of the misnamed Patient Protection and Affordable Care Act is the requirement that Americans buy health insurance, which Supreme Court Chief Justice John Roberts decided really wasn't a mandate in a bizarre opinion upholding the law. As important as that requirement are the exchanges through which people are supposed to purchase insurance.

PPACA includes tax credits and subsidies so people can afford insurance made more expensive by a gaggle of new federal requirements. Congress didn't just decide that people have to buy insurance. People must purchase insurance as determined by Washington. Or, more accurately, the Health and Human Services bureaucracy, which is empowered to decide every Americans' coverage.

However, Congress and the president tied federal tax credits and subsidies only to policies purchased through state-established exchanges. Apparently the administration did not imagine that anyone would defy Uncle Sam. However, so far only 14 states and the District of Columbia have created exchanges. At least half of the states are likely to refuse to construct insurance exchanges. Which means Washington will have to do it for them. Indeed, HHS Secretary Kathleen Sebelius admitted that the federal government may have to run as many as 30 exchanges. But PPACA did not provide tax credits or subsidies for federally established exchanges.

Which creates another problem for the administration. In a recent paper for Case Western Reserve University School of Law, Case Western law professor Jonathan Adler and Cato Institute scholar Michael Cannon point out: "The tax credits and subsidies for the purchase of qualifying health insurance plans in state-run exchanges serve as more than just an inducement to states. For example, these entitlements also operate as the trigger for enforcement of the Act's 'employer mandate.' As a consequence, that mandate is effectively unenforceable in states that decline to create an exchange. Because such a large number of states may decline to create exchanges of their own, it may be difficult to implement the law as some had intended."

Oops!

In a system based on the rule of law, the Obama administration would go back to Congress and ask it to "fix" the law. But the administration knows that the GOP-dominated House would laugh in response. Even the Senate, with increased Republican membership, would refuse. So the president decided to dispense with the legislative branch and make law on his own.

The Internal Revenue Service issued a rule in May extending the provisions relating to state exchanges to federal ones. It's a nice trick but contrary to PPACA. Note Adler and Cannon: "The plain text of the Act only authorizes premium-assistance tax credits and cost sharing subsidies for those who purchase plans on state-run exchanges."

In fact, the administration does not claim otherwise. The Department of Health and Human Services stated that the IRS rule was "supported by the statute." The Treasury Department explained that the regulation was "consistent with the intent of the law and our ability to interpret and implement it." However, nothing in the U.S. Constitution authorizes bureaucrats to act as lawmakers as they "interpret and implement" legislation passed by Congress.

The IRS has its defenders, such as Timothy Jost of Washington & Lee University. In fact, he seems to resent Adler and Cannon defending the rule of law. He asks why "extending the benefits of our health care system to millions of uninsured Americans troubles" opponents of Obamacare.

In fact, politicizing the health care system, turning control of people's insurance coverage over to Washington, is bad policy. When Uncle Sam rations care those with the least political influence are likely to do badly. Health care reform is necessary, but nationalizing the system was not the right approach.

Anyway, good intentions cannot justify ignoring the rule of law. The Constitution means little if the executive can write legislation at its pleasure. Congress, not the president, makes law. If legislators didn't vote tax credits and subsidies for federal exchanges, the president can't add them.

Jost admits, as he must, that the law does not authorize credits and subsidies for federal exchanges, but says no matter. He contends that the omission was just a "drafting error."

However, the Supreme Court has ruled that it will fix legislation only where there is "overwhelming evidence from the structure, language, and subject matter of the law" that Congress meant otherwise. That is not the case here.

Congress has a responsibility to do its job right and to fix its own mistakes. The courts do not have carte blanche to step in. Adjusting a typo is one thing. Adding a substantive provision that reduces revenue and increases expenditures is another. Indeed, if no state created an exchange, the IRS regulation would cost nearly $700 billion over the coming decade.